PGIM Backs $4 Billion of US Land-Bank Deals in Asset-Based Push

Prudential Financial Inc.’s asset-management arm has financed about $4 billion of land-banking projects through a partnership with Domain Real Estate Partners, part of a push to gain exposure to the US homebuilding industry.

In a typical land-bank transaction, a homebuilder sells undeveloped lots to financing partners and pays a premium for the right to repurchase them later as homes are ready to be built. The arrangement allows builders to control future inventory without tying up as much cash in raw land, freeing capital for construction and other needs. For private sector land banks, the firms fund the acquisitions with backing from large asset managers and institutional investors.

PGIM began working with New York-based Domain last year, and the pair have already completed seven residential land-bank deals, according to a statement Tuesday. The transactions are a type of asset-based finance, an increasingly popular strategy in which loans are written against specific hard assets instead of lending directly to a company.

“Homebuilders want to manufacture homes, not own land,” said Oliver Nisenson, head of private asset-based finance at PGIM. “Asset-based lenders such as PGIM bridge the gap by bringing in the steady capital and underwriting expertise to support this new model.”

In a similar tie-up, Guggenheim Investments struck an agreement last week Bedrock Land Finance, which said it plans to fund $5 billion of residential development projects in coming years by tapping lending partners.